Fighting the liquor lobby

Baltimore County Executive Kevin Kamenetz recognized the insanity of Baltimore County liquor laws when talking to an acquaintance in Ocean City. The man owned a restaurant and nightclub that had gone out of business, and he was musing about what assets could be salvaged — chairs that could be sold, or windows that could be used somewhere else — when Mr. Kamenetz asked him what he planned to do with his liquor license. Much to Mr. Kamenetz's surprise, the main looked at him in confusion and said he'd hand it back in to the county.

To most people, this would seem to make sense — he had a government-issued license he didn't need anymore. But to Mr. Kamenetz and anyone else steeped in Baltimore County laws, that sounds like throwing money down the drain. After all, where Mr. Kamenetz comes from, liquor licenses aren't mere permission slips from the county, they are salable commodities, and valuable ones at that. Licenses are traded from one owner to another in an arcane and highly regulated system that serves to limit competition and enrich a lucky few. The system is inequitable and robs the county of a powerful economic development tool, and Mr. Kamenetz, to his credit, is determined to do something about it.

This Thursday, a committee he impaneled to study county liquor laws is set to vote on recommended reforms. It has identified some issues that will be easy to deal with but is pushing forward with consideration of others that promise more sweeping change. But even those proposals are too timid; they would leave in place a system that limits the county's ability to issue licenses when and where it sees fit for decades at least. Mr. Kamenetz has hinted that he might be interested in more fundamental and immediate changes to the system. It will be a difficult fight that will force him to confront powerful entrenched interests in the General Assembly — which, in the topsy turvy world of Baltimore County liquor laws, is in control of such matters. But he should not back down.

Baltimore County's liquor laws date back to the years after Prohibition, and they are supposedly designed to limit the consumption of alcohol by county residents. But in practice, they take what should be a local government decision about what licenses are granted where and hand it over to industry insiders. Here's how.

The number of licenses is limited by the county's population — there is supposed to be one license for every 2,500 residents. But the cap isn't calculated countywide. Instead, it is administered on the level of the county's 15 election districts, an arcane set of lines that have not changed in decades and don't necessarily reflect the way county communities are divided today. Election districts are used now for no purpose other than divvying up liquor licenses.

Because of population shifts over time and licenses that were grandfathered in when the system was created, the actual distribution is far from equal. In particular, the 15th District, which roughly corresponds to Essex and Middle River, has 80 more licenses than its population should allow. Meanwhile, in other areas of the county, where the income levels and demographics would support more bars and restaurants than the caps would allow, licenses are hard to come by.

That has a distorting effect on supply and demand. In the 8th District, which covers Towson, Lutherville and parts of Timonium, a license recently sold at auction for $225,000, and some have sold for as much as $300,000. In other parts of the county, licenses typically sell for about $30,000, and sometimes as little as $10,000. That's not good for business either in the high-demand districts, where prospective restaurateurs must fork over a fortune to get a license, or in the low-demand areas where license holders might want to sell but can find no market.

Periodically, county officials have tried to reform the system, but they have run into a wall of opposition from the liquor industry. Its representatives argue that changes would be unfair to those who paid so much for their licenses and that, in any case, wholesale changes aren't necessary. Typically, they agree to support legislation in Annapolis to allow a limited transfer of licenses from one district to another, releasing the political pressure without upending the system.

That's more or less what they're trying to do this time, as well. Representatives of the liquor industry and others on the county executive's committee have agreed in principle, if not all the particulars, to a plan of "equalization" that would allow the transfer of about 47 licenses from the 15th District to other parts of the county over the next several years. If a certain number of licenses isn't transferred in any given year, the county would be allowed to create new limited beer and wine licenses where it sees fit.

That would certainly reduce the price of licenses in high-demand areas, but it would basically leave the system intact. Licenses would still be salable commodities, they would still be divided up by election districts, and the county would still lack a key tool for economic development. Those who paid for the licenses — even at a somewhat reduced rate — would still have an incentive to resist further reform lest the value of their investment be diminished.

Michael Mohler, the executive director of the liquor board and co-chairman of the committee, has proposed going a step further. He has suggested that once the "equalization" process is done, the population limits would gradually be reduced and the division by election districts eliminated. The liquor industry opposes that idea, but even it would be inadequate. It would leave the basic structure of the liquor license system in place for another 15 to 20 years. That's too long.

The better approach would be to eliminate the restrictions by election district right away. That would allow a true free market for existing licenses, which would benefit both those who want to sell but now can't and those who can't afford the current high prices. Any new licenses the county issues should not be transferable, and the county should create a sunset on the transferability of existing licenses. It should also eliminate restrictions on how many licenses any one corporate entity can hold, a rule that has limited the development of high-end chain restaurants in the county.

Liquor licenses shouldn't be like family farms, passed down from one generation to the next, and they shouldn't be investments for those who hope for a windfall one day if a window opens for sale to a district where they are in short supply. They are instruments for the government to protect and promote the quality of life in the community, and how they are used should be up to the local government, not to state lawmakers and vested special interests. Reform may be painful to those who invested a small fortune in a liquor license, but allowing the status quo to continue only makes matters worse.

This will be a difficult task for Mr. Kamenetz. He will be up against one of the most influential lobbies in Annapolis, one that has spent decades cultivating supporters in the General Assembly. But if he intends to keep his campaign promise of moving Baltimore County beyond its good-old-boy past, it's the kind of fight he needs to take on.